Title
Benito vs. Securities and Exchange Commission
Case
G.R. No. L-56655
Decision Date
Jul 25, 1983
Petitioner challenged share issuance and capital stock increase, alleging pre-emptive rights violation and lack of notice. SC upheld SEC ruling, dismissing claims as unsubstantiated.
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Case Digest (G.R. No. L-56655)

Facts:

Incorporation and Initial Capitalization:
On February 6, 1959, the Articles of Incorporation of respondent Jamiatul Philippine-Al Islamia, Inc. (originally Kamilol Islam Institute, Inc.) were filed with the Securities and Exchange Commission (SEC) and were approved on December 14, 1962. The corporation had an authorized capital stock of P200,000.00, divided into 20,000 shares at a par value of P10.00 each. Out of the authorized capital stock, 8,058 shares worth P80,580.00 were subscribed and fully paid for. Petitioner Datu Tagoranao Benito subscribed to 460 shares worth P4,600.00.

Increase in Capital Stock:
On October 28, 1975, the respondent corporation filed a certificate to increase its capital stock from P200,000.00 to P1,000,000.00. The increase was approved during a stockholders' meeting held on November 25, 1975, where P191,560.00 worth of shares were represented. Subsequently, P110,980.00 worth of shares were issued from the unissued portion of the authorized capital stock of P200,000.00. From the increased capital stock of P1,000,000.00, P160,000.00 worth of shares were subscribed by Mrs. Fatima A. Ramos, Mrs. Tarhata A. Lucman, and Mrs. Moki-in Alonto.

Petition Filed by Datu Tagoranao Benito:
On November 18, 1976, petitioner filed a petition with the SEC alleging that:

  1. The issuance of P110,980.00 worth of shares violated his pre-emptive rights.
  2. The increase in authorized capital stock was illegal because stockholders were not notified of the meeting where the increase was approved.
    He prayed for the cancellation of the additional shares issued, registration of 2,540 shares he acquired from Domocao Alonto and Moki-in Alonto, and an accounting of funds to the stockholders.

Respondents' Defense:
Respondents denied the allegations and claimed that petitioner had no cause of action, as the stock certificates given to him were collateral for a loan from Domocao Alonto and Moki-in Alonto.

SEC Decision:
On July 11, 1980, the SEC Hearing Officer ruled:

  1. The issuance of unissued shares was valid and not subject to pre-emptive rights.
  2. Stock certificates in the names of Domocao Alonto and Moki-in Alonto should be canceled and reissued in petitioner’s name.
  3. The election of the Board of Trustees on October 30, 1976, was irregular, and a new stockholders' meeting should be called.
    The SEC En Banc affirmed this decision on March 9, 1981.

Issue:

  1. Whether the issuance of P110,980.00 worth of shares violated petitioner’s pre-emptive rights.
  2. Whether the increase in authorized capital stock from P200,000.00 to P1,000,000.00 was valid despite lack of notice to stockholders.
  3. Whether petitioner is entitled to attorneys' fees, damages, and litigation expenses.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)


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